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In an order issued on Friday, June 27, 2014, the Honorable R. Brooke Jackson of the United States District Court for the District of Colorado overturned "three interconnected" decisions by the U.S. Forest Service ("USFS") and the Bureau of Land Management ("BLM") regarding coal mine leasing and exploration activities in the Sunset Roadless Area in the North Fork Valley in western Colorado, west of Mt. Gunnison and the West Elk Wilderness due to shortcomings in the agencies' National Environmental Policy Act ("NEPA") compliance. High Country Conservation Advocates v. United States Forest Service, United States District Court for the District of Colorado, Civil Action No. 13-cv-01723-RBJ, June 27, 2014. WildEarth Guardians and Sierra Club were co-plaintiffs. The project proponent, Arch Coal, was permitted to intervene in the case.

The District Court's Ruling: The court rejected an Environmental Impact Statement ("EIS") regarding a coal mine lease extension because it did not estimate the "social costs" of carbon emissions and climate change, even though the EIS did provide quantitative estimates of amounts of greenhouse gas ("GHG") emissions. The court also overturned a coal mine exemption in the Colorado Roadless Rule because the EIS failed to disclose GHG emissions from coal mining and coal combustion resulting from the additional coal supply, and failed to address the substance of an expert report provided by the plaintiffs, which the court considered a "reasonable opposing view." Finally, the court overturned an Environmental Assessment ("EA") for a coal exploration plan because it failed to take a hard look at impacts on recreation and failed to consider a reasonable alternative. The court immediately enjoined any earth-disturbing activities, vacated the approval of the exploration plan, and ordered the parties to, within 30 days, inform the court of the parties' agreement on further remedies or file supplemental briefs on remedies.

The Challenged EIS: The lease extension Final EIS stated there are no standardized protocols to quantify impacts from GHG emissions. The court found there is a tool available: the social cost of carbon protocol provided by the Interagency Working Group on Social Costs of Carbon, Technical Support Document (Feb. 2010). The protocol can be found at http://www.epa.gov/oms/climate/regulations/scc-tsd.pdf. The protocol presents estimates of monetized damages associated with incremental increases in carbon emissions, and was designed "to allow agencies to incorporate the social benefits of reducing carbon dioxide (CO2) emissions into cost-benefit analyses of regulatory actions that have small, or 'marginal,' impacts on cumulative global emissions." An analysis under the protocol had been included in the Draft EIS but was deleted from the Final EIS due to a comment from an agency economist that the issue of placing quantitative estimates on GHG is controversial and there is a very wide range of potential costs ($6 million to $984 million per year).

The District Court's Rationale: The court found fault with the elimination of the "social cost of carbon" analysis from the Final EIS because the Final EIS still included a quantification of the benefits of the lease modification, and the agency relied upon that in justifying its approval. The court found that, even though NEPA does not require a cost-benefit analysis, if a cost-benefit analysis is included in a NEPA document, it is arbitrary and capricious for the agency to quantify project benefits but ignore a similar analysis of costs without explanation.

The court conceded the agencies may have had justifiable arguments for not including the "social cost of carbon" analysis, including the speculative nature of analysis, provisional status of the protocol, and the fact that the protocol was designed for rulemakings. However, the court rejected those as post hoc arguments -- raised in the litigation for the first time. The court did not conclude whether these arguments would be enough, but found that the agencies had not explained themselves adequately in the Final EIS, and the complete omission of the social cost analysis (essentially setting carbon costs at $0) was error in light of the emphasis placed on the economic benefits of the project. Interestingly, the court did not address, or even mention, the Council on Environmental Quality's guidance on assessing impacts of GHG emissions and climate change, and whether the agencies followed that guidance.

Take-Away: The decision presents important issues for consideration by project proponents engaged in energy development, whether coal or oil and gas focused. We can provide further analysis of this decision, the social costs of carbon protocol, and potential risks raised by these developments as desired.

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